Volkswagen Group of America made a major announcement Tuesday morning. The German auto giant will build a major new plant 12 miles south of downtown Chattanooga, Tennessee. This translates to a $1 billion investment in the economy of the Tennessee city and 2,000-plus jobs will be generated.

VW plans to use the plant to build a North American-centric midsize sedan. It sees the U.S. as an important future market for long term goals. Volkswagen AG CEO Martin Winterkorn says the company has set a sales target of 800,000 VWs in the U.S. by 2018 and plans to become “the biggest European carmaker” in the U.S. market, calling the new plant “an important part of our volume strategy.”

The new plant is expected to go into production in early 2011 with an initial capacity to produce 150,000 vehicles annually. This will be VW’s first U.S. plant since it closed the doors of it’s Pennsylvania factory in 1988.